Research Reports

The following companies are subjects of research reports issued recently by investment firms. Many of the reports may be purchased from Thomson Financial Investment Banking/Capital Markets Group, at 888-989-8373 or www.tfibcm.com, or are available through Dow Jones Interactive. Share prices at the time the report was issued and the date of the report are in parentheses.

Xilinx
(XLNX-NNM) by Investec (22.56, Jan. 22) We continue to believe the company's high exposure to the communications end market (50% of revenue) will be likely to weigh down any recovery in their other end markets. In addition, the seasonal downtick in their consumer market is now mitigating revenue growth in the near term. Xilinx's current price represents a 23% premium to its previous trough. Maintain Sell rating.

Overture Services
(OVER-NNM) by Kaufman Brothers (27.23, Jan. 16) We are initiating coverage with a Buy rating. We value the shares at 25 times 2004 estimated earnings per share of $1.36, representing a market value of $2.1 billion, or $34 per share... Overture's bid-for-position paid-listings advertising model delivers advertisers high-quality leads at a reasonable cost and enables portals, ISPs, and search engines to monetize their traffic. We believe that Overture represents one of the best ways for investors to play the large paid-listings market opportunity and we view the shares as attractive, particularly in the mid-20s range.

Emulex
(ELX-NYSE) by R.W. Baird (23.50, Jan. 15) We are downgrading the stock to Neutral on valuation and relatively disappointing fiber-channel results from Q-Logic. We continue to believe that Emulex will report some upside for the December quarter, but that the magnitude is now unlikely to be enough to meaningfully increase estimates for 2003. We would be a buyer in the teens, as we believe there is little chance the company will miss the quarter or reduce guidance.

Source Capital
(SOR-NYSE) by A.G. Edwards (54.80, Jan. 15) Source Capital is a leveraged publicly traded investment company... We have downgraded our rating to Sell/Conservative from Hold/Conservative. Our rating change is based on the current market valuation of the fund's shares in relation to its net asset value, or NAV. The shares are trading at a 30% premium to NAV, a level that we find very rich compared with its five-year average premium of 7.8%, and its ten-year average premium of 4.4%. Source's shares recently traded at $55.25 per share, which is more than $12 per share above its underlying $42.30 NAV. We believe the premium to NAV will eventually revert to its historical average, which may result in downward pressure on Source's share price.

LaBranche & Co.
(LAB-NYSE) by Putnam Lovell (25.50, Jan. 17) LaBranche reported 36 cents in fourth-quarter EPS, versus our estimate of 32 cents and consensus of 34 cents. Surprisingly, LaBranche's realization rate increased to 0.0391% from 0.0379% in the third quarter. Total revenue of $103.8 million was down 3.8% sequentially, but pretax margins increased to 38.4% from 34.4% in the third quarter. Operating expenses decreased 9.7% sequentially to $70.1 million, driven by decreases in compensation and interest expense of $2.8 million and $2.2 million, respectively. We are increasing our fiscal 2003 EPS estimate to $1.69 from $1.65, driven by lower interest expense. We maintain our Sector Perform rating.

WebEx Communications
(WEBX-NNM) by SWS Securities (15.45, Jan. 22) Microsoft is acquiring PlaceWare for an undisclosed amount in a transaction that is expected to close in the first quarter of 2003....Although it is unclear what business model Microsoft will pursue, we believe this acquisition makes the company a serious competitive threat to WebEx. In our opinion, this announcement will probably pressure WebEx shares and cause significant near-term price volatility. Consequently, we are downgrading to Neutral until we become more comfortable with WebEx's ability to compete in the industry's new landscape. We also note that WebEx may become a takeover candidate, if one of Microsoft's competitors decides to aggressively pursue the web-conferencing market opportunity.

West Marine
(WMAR-NNM) by B. Riley (17.28, Jan. 21) Downgrading to Neutral. Shares have appreciated by 45% since we initiated coverage with a Buy rating on Sept. 20 and recently surpassed our price target of $17.25 on news of the company's acquiring its largest competitor, BoatU.S. While we are impressed with management's performance in a difficult retail environment and remain convinced that the acquisition is a smart one, we believe that shares of West Marine no longer present as compelling a risk-reward profile as they did when we initiated coverage. We feel it is prudent to downgrade while we watch the company's progress toward integrating the acquisition and achieving its ambitious growth targets in a difficult economic environment.

Crosstex Energy LP
(XTEX-NNM) by Raymond James (22.25, Jan. 22) We are initiating coverage with a Strong Buy rating and a target price of $26. Our target price is based on a forward-looking pretax yield of 8.2% and our 12-month quarterly distribution estimate of $2.08 per unit. This implies a total return of 28% given the current unit price of $22.10. We believe that Crosstex will prove to be a solid long-term investment, due to its strategically located midstream assets and proven management team, which has an extensive history of growth.

Valley National
(VLY-NYSE) by Ryan Beck (27.01, Jan. 21) At 16.2 times 2003 earnings, the stock is trading near its forward multiple high of 18.2. With earnings growth expected to slow during 2003 and the stock repurchase plan near completion, the shares could experience some multiple compression if another share-repurchase plan isn't announced, which in our view could cause significant tangible book value dilution. We reiterate our Market Perform rating. Looking beyond our 12-month time horizon, we would consider the shares a core holding based on management's focus on shareholder value and execution of a prudent business model. The stock currently has a 3.4% dividend yield and Valley generally has declared a stock dividend or split every year.

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